UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Next Thread
Author: yammaboy One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Retirement & Diversification Date: 10/31/2000 7:02 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I have retired after 31 years with the same company at the age of 58. I have been fortunate enough to accumulate more than 1.2 million in stock with that company. It pays dividends 4 times a year. I also have a hypo loan of 175 thousand which I used to buy more stock. I need to get started on diversification.

I have signed up for the Early Retirement Seminar from the Fool.

What would be the first three steps I need to follow to start my diversification with the least amount of taxes being paid.

I would appreciate your comments.

Regards,

yammaboy
Print the post Back To Top
Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 25891 of 74759
Subject: Re: Retirement & Diversification Date: 11/1/2000 12:07 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Author: yammaboy Date: 10/31/00 7:02 AM Number: 25868
I have retired after 31 years with the same company at the age of 58. I have been fortunate enough to accumulate more than 1.2 million in stock with that company. It pays dividends 4 times a year. I also have a hypo loan of 175 thousand which I used to buy more stock. I need to get started on diversification.

I have signed up for the Early Retirement Seminar from the Fool.

What would be the first three steps I need to follow to start my diversification with the least amount of taxes being paid.

I would appreciate your comments.


IMHO, you are absolutely correct to diversify as quickly as possible, and to minimize taxes as you do it. Just take a look at what happened to thousands of retired Xerox workers who failed to diversify. They never dreamed their company stock would plummet from $62 to $8 almost overnight, and that the dividend would be cut to 20% of its former amount. It CAN happen to any company, no matter how solid it appears at the moment!!

1) Make a plan. The Retirement Seminar should be ideal for that.

2) Learn about the preferential treatment of Company Stock when distributed to the employee from a qualified retirement account. In many cases, you can take your company stock and pay taxes only on the cost basis. Then when you sell it, you pay long term capital gains (usually 20%) as opposed to your marginal income tax rate. However, also recognize that in retirement, you may be in a low enough bracket that your overall tax rate is close to 20%, in which case the "Company Stock Rule" doesn't help much. This whole issue needs very careful investigation.

3) It's usually best to take a lump sum option when available (vs. annuitized payments) and roll it over into an IRA. Get your money under your direct control where you have lots of investment options.

4) Many planners recomend no more than 4% of your portfolio to be in any specific stock. Other planners will say that if you really know the company well, and are quite confident in the future, that you can increase that amount up to 10%. I don't know many planners who would recommend higher 10% in any situation.

5) Keep 3 to 5 years of living expenses in cash equivalents like money markets, CDs, or high grade bonds to weather a serious recession.

This should start your thinking process. Good luck.

-rkm


Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Next Thread
Advertisement